Jun 13

Today’s News 13th June 2024

  • FOMC Holds Rates As Expected, Dot-Plot Shifts More Hawkish In 2024
    FOMC Holds Rates As Expected, Dot-Plot Shifts More Hawkish In 2024

    Since the last FOMC statement (on May 1st), stocks and bonds have outperformed (with the former at record highs), gold is flat while the dollar is down modestly. Amid all that, oil is down significantly…

    Source: Bloomberg

    These market moves have been prompted by a ‘bad news is good news’ regime as US macro data has serially disappointed…

    Source: Bloomberg

    …adding significantly to hopes for a more dovish Fed (2 cuts priced in for 2024 and an additional 92bps of cuts in 2025)…

    Source: Bloomberg

    The good news is that while growth ‘surprises’ have slipped lower, inflation ‘surprises’ have also drifted lower after four months of stagflationary signals worrying markets…

    Source: Bloomberg

    Today we also get to see a new DotPlot, which is expected to show and adjustment down from three to two cuts for 2024 (with a risk to an adjustment down to just one cut)…

    Source: Bloomberg

    Of course, as a reminder, the global backdrop for today’s Fed decision is that big US trading partners, like Canada and the euro area, have cut interest rates even as inflation remains an issue.

    So, What Did The Fed Do?

    The Fed held rates unchanged as expected…

    *FED HOLDS BENCHMARK RATE IN 5.25-5.5% TARGET RANGE

    And changed wording on inflation (from a “lack” of progress):

    *FED: INFLATION MADE MODEST FURTHER PROGRESS IN RECENT MONTHS

    BUT…

    The dot-plot was hawkish, adjust to just one 25bps cut in 2024 (and four 25bps cuts in 2025)

    *FOMC MEDIAN FORECAST SHOWS 25 BPS RATE CUTS IN ’24 VS 75 BPS

    *FOMC MEDIAN FORECAST SHOWS 100 BPS RATE CUTS IN ’25 VS 75 BPS

    There were no dissents today, extending the streak of zero votes against the FOMC policy decision to 16 meetings, the longest period of no dissents since Alan Greenspan’s 17-meeting streak from August 2003 to September 2005 – when Mark Olson dissented.

    Read the full redline below (barely changed):

    Tyler Durden
    Wed, 06/12/2024 – 14:00

  • Elliott Management May Force Southwest To Abandon 'Bags Fly Free' Policy
    Elliott Management May Force Southwest To Abandon ‘Bags Fly Free’ Policy

    With activist hedge fund Elliott Management in the pilot’s seat at Southwest Airlines, the budget airline’s popular “bags fly free” policy is under scrutiny.

    If Paul Singer gets his way, the airline’s popular “bags fly free” policy could end. This policy is a huge value proposition for customers when choosing a carrier to fly across the US. 

    According to Bloomberg… 

    “Elliott appears to have a different view, noting in a website presentation that Southwest has “written off” revenue opportunities implemented across the industry over the past 15 years, including assigned seating, premium products, a bare bones basic economy fare and checked bag fees.” 

    Southwest’s policy clearly stated on its website: “Each Customer is allowed two free checked bags.” 

    Elliott is right to consider scrapping the policy to boost additional revenue for the struggling carrier, which recently withdrew its 2024 fiscal outlook due to delays in Boeing jet deliveries.

    According to the US Transportation Department, in 2023, the airline only collected $73 million in checked bag fees, while American Airlines took in $1.4 billion. Spirit Airlines collected $988 million, and Frontier Group collected about $880 million. 

    Data from IdeaWorks and CarTrawler show that airlines globally collected $33.3 billion in baggage fees last year, up nearly 15% from 2023. 

    President of IdeaWorks, Jay Sorensen said if Southwest were to drop its “bags fly free” policy because of pressure from Elliot, that could trigger an exodus from loyal customers. 

    Sorensen said such a change could be “traumatic” to the airline’s customers, culture, and employees.

    Conor Cunningham, a Melius Research analyst, said the policy is “so ingrained in the culture” that he “can’t imagine that they’d give up on it.” 

    Southwest’s “value proposition and something customers know they are getting when they travel with us,” Cunningham said. 

    Henry Harteveldt, a travel industry analyst and founder of Atmosphere Research Group, said, “I don’t think Southwest can dismiss not charging for bags anymore, not when you have an activist investor sitting on $1.9 billion of your stock.” 

    In markets year-to-date, Southwest shares have broadly underperformed the S&P airline index. 

    “There are going to be decisions that Elliott may force on the airline, with Southwest holding its nose. You cannot ignore that shareholder,” Harteveldt concluded. 

    Tyler Durden
    Wed, 06/12/2024 – 13:40

  • FOMC Preview: From Three Rate Cuts To Two
    FOMC Preview: From Three Rate Cuts To Two

    Coming just hours after the May CPI print, tomorrow’s – and the month’s – main event is the FOMC decision due at 2pm ET, when the Fed is widely expected to leave rates on hold at 5.25-5.50%, and the statement will likely also largely be reiterated after slight tweaks in the May statement. Attention will fall on the Summary of Economic projections, and more specifically, the Dot Plot, where the number of projected rate cuts in 2024 will be trimmed from 3 to 2. After a string of hot inflation reports in Q1, the Fed has been stressing that the luxury of a strong economy gives the Fed time to be patient before acting, and the hot NFP released (assuming of course that a drop of 625,000 full-time jobs is viewed as “strong”), last week only gives the Fed more time. Therefore, it is likely the 2024 median FFR will be revised up from the 4.6% – or equivalent to 3 rate cuts over the remainder of 2024 – pencilled in at the March meeting.

    Indeed, money markets currently look for between one or two rate cuts this year, with WSJ’s Fed mouthpiece Nick “Nikileaks” Timiraos confirming “they know that we know that they know that we know”, or that “most sell-side economists and other professional Fed watchers now anticipate one or two rate cuts this year in either September or December”. In other words, the ground is set for the dots to tighten, but the question is by how much: one, two or three cuts? It is also worth noting that the May US CPI report will be released on the morning of the FOMC, which will impact expectations of the dot plot going into the rate decision. With FOMC members already in possession of the May CPI report, Powell has previously said that the Fed is allowed and encouraged to update their forecasts until late morning of the meeting, therefore the data will likely be incorporated into the Fed’s decision-making and forecasts. Then, once the rate decision, statement and SEPs are released, attention will turn to Fed Chair Powell’s Press conference at 19:30 BST / 14:30 EDT.

    POLICY: The Fed is widely expected to leave rates on hold at its June meeting with the Fed not yet convinced inflation is returning to target in a sustained manner, despite rate cuts from global peers such as the ECB and BoC last week. Given tweaks to the statement at the last meeting, noting there has been a lack of further progress towards the 2% goal and that risks to the mandate have moved towards better balance, they will unlikely alter the statement much. It will also likely repeat “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” Nonetheless, the focus of this meeting will be on the updated Summary of Economic Projections (SEPs), or “Dot Plots”.

    FOMC POLICY STATEMENT

    Current conditions: Morgan Stanley look for an important change to the characterization of inflation that is an acknowledgement of improvement in inflation data through April, though still not enough improvement to be convincing.

    Risk to the statement: Since the last FOMC meeting, there has been a single improved inflation print in April. The risk is that FOMC officials have not yet gained enough conviction, and that they pair unchanged inflation language with a more concentrated move in the dot-plot to fewer cuts this year.

    SUMMARY ECONOMIC PROJECTIONS: With the Fed recently stressing that the luxury of a strong economy gives the Fed time to be patient before acting, it is likely the 2024 dot will be revised up, particularly after the May NFP report. WSJ’s Timiraos highlights that “Most sell-side economists and other professional Fed watchers now anticipate one or two rate cuts this year in either September or December”. Money markets are currently pricing in 38bps of rate cuts by year-end (fully priced for one cut, with a c. 50% probability of another 25bp cut), however, this is subject to change with the US CPI to be released on the morning of the FOMC. Which may have some sway on Fed officials’ thinking when entering their dot plots. Powell has previously said FOMC members are encouraged to update their forecasts up until mid/late morning, once the Fed has seen the data.

    The March dot plot was unchanged from December, with the median view looking for three rate cuts in 2024, with rates ending the year at 4.5-4.75% vs the current 5.25-5.50%. Nonetheless, the composition of dot plots was more hawkish, with nine members pencilling in the year-end rate at 4.6%, vs six in the December dot plots, with more dovish dots aligning with the Median. Nonetheless, it would have only taken one of the median dots to pencil in a higher rate to have lifted the median, with 8 on the FOMC pencilling in a rate above the current median. Therefore, that, accompanied by a string of hot inflation reports in 2024, as well as plenty of Fed speak suggesting they can afford to be patient before cutting rates, it is likely the 2024 median dot plot will be revised up. It is likely to pencil in just one or two rate cuts this year, instead of three. Note, the median 2025 dot is currently at 3.9% (vs December’s 3.6%), the 2026 dot is at 3.1% (vs December’s 2.9%), with the longer run rate, or neutral rate, at 2.6% (vs December’s 2.5%). Some on the Fed have suggested it is possible the Neutral Rate has risen from before (Bowman), while others suggest the neutral rate is relatively low (Waller).

    Aside from rate forecasts, the SEP will also show the updated views for Core PCE, PCE, Unemployment and real GDP. FOMC Vice Chair Williams gave his personal expectations, noting he sees inflation at 2.5% this year (vs the Fed March median SEP of 2.6% on Core, 2.4% on headline), before being closer to 2% in 2025 (vs Fed median of 2.2%). He sees 2024 growth between 2.0-2.5% (vs Fed March Median SEP of 2.1%). Williams expects unemployment of 4.0% this year (vs Fed March Median of 4.0%).

    ECONOMY: The prior statement saw a slight language tweak to suggest that risks to achieving its mandate have moved towards better balance (prev. moving into better balance), reflecting some of the concerns about an employment downturn. However, it also added a line that there has been a lack of further progress towards the committee’s 2% inflation goal. Since then, there have been mixed signals from the labor market, with the April NFP and JOLTS coming in soft, while the May NFP was much hotter than expected, although the Household survey was a disaster with full-time jobs plunging and the unemployment rate hitting 4.0%. The Fed has made it clear they are willing to hold rates higher for longer given the strength of the economy, and only in the case of an unexpected weakening of the labor market, or signs that inflation is convincingly returning to target, would they be prepared to lower rates. Meanwhile, after the hot inflation reports in Q1, the April reports were on net softer, and were seen as a welcome sign to the Fed, but still a reminder that the return to target will still be slower than initially expected.

    DOT PLOT: Goldman, along with many on Wall Street, expects the median forecast to show two cuts in 2024 (vs. three in March) to 4.875%, four cuts in 2025 (vs. three in March) to 3.875%, and three cuts in 2026 (unchanged) to 3.125%. Goldman suspects that the Fed leadership would prefer for the median dot to show a two-cut baseline in 2024 in order to retain greater flexibility to cut in Q3 if the inflation data warrant it. But the key risk is that the median could instead show just one cut in 2024, especially if the May core CPI print comes in well above the 0.3% forecast or if more FOMC participants see a 2.8% year-on-year rate of core PCE inflation as too high to justify two rate cuts. Goldman also thinks the median longer-run or neutral rate dot could tick up a touch further. FOMC participants are likely to raise their longer-run dots gradually over time because both market-based approximations of the neutral rate, namely distant forward interest rates, and the econometric models of neutral that the Fed staff tracks suggest that the neutral rate is higher than the current median estimate of 2.56%. Finally, the bank expects that in addition to gradually raising their longer-run neutral rate estimates, FOMC participants will continue to show terminal rate projections that are above their neutral rate estimates on the grounds that non-monetary policy tailwinds are boosting aggregate demand (i.e. Joe Biden’s debt tsunami) and offsetting the impact of higher interest rates on the economy.

    RECENT FED SPEAK: Fed speakers have been mostly singing from the same hymn sheet, still stressing a higher-for-longer
    approach and no rush to cut rates, noting they will be letting the data dictate decisions. Many said that a rate hike is not in the baseline outlook, although some are refusing to rule it out in case inflation were to surprisingly accelerate again. Nonetheless, although after the hot inflation reports in Q1, the April reports have started to bring some optimism that inflation is still easing, albeit at a slower pace than before, perhaps indicating it will take longer for inflation to return to the Fed’s 2% target. Officials have stressed that inflation does not need to return exactly to 2% before they cut rates, but they need to be confident that it is convincingly and sustainably on its way to target, something which they do not have at the moment, and they would need a string of good inflation reports for them to gain that confidence. Some, including Chair Powell, have noted that an unexpected weakening in the labour market could also be a reason to cut rates, even if they did not have the inflation confidence yet, but so far the labour market still shows signs of tightness and is in no way classified as an “unexpected weakening”, particularly after the May jobs report. Powell stated it would take more than “a couple of tenths” to move higher in the unemployment rate for an unexpected weakening.

    Tyler Durden
    Wed, 06/12/2024 – 13:35

  • MSNBC's Maddow Says She's Worried Trump Will Put Her In A Concentration Camp
    MSNBC’s Maddow Says She’s Worried Trump Will Put Her In A Concentration Camp

    Authored by Steve Watson via Modernity.news,

    MSNBC performative hack Rachel Maddow has declared that she is worried that if Donald Trump becomes the president again he’s going to round her up and throw her in a concentration camp with all her leftist friends.

    Yes, really.

    Maddow teamed up with CNN’s resident mole man and former Brain Stelter acolyte Oliver Darcy for a super best friends ‘we hate Trump’ interview in which she made the comments.

    Darcy told Maddow, “Trump and his allies are openly talking about weaponizing the government to seek revenge against critics in media and politics, with some of his extremist allies even talking about jailing their fellow Americans,” further asking “You’re one of his most notable critics on television. Are you worried that you could be a target?”

    Maddow replied “I’m worried about the country broadly if we put someone in power who is openly avowing that he plans to build camps to hold millions of people, and to ‘root out’ what he’s described in subhuman terms as his ‘enemy from within.’”

    “Again, history is helpful here. He’s not joking when he says this stuff, and we’ve seen what happens when people take power proclaiming that kind of agenda,” Maddow further declared.

    She continued, “I think there’s a little bit of head-in-the-sand complacency that Trump only intends to go after individual people he has already singled out. Do you really think he plans to stop at well-known liberals?”

    “When Trump invokes the Insurrection Act to deploy the U.S. military against civilians on his first day in office, do you think he then rescinds the order on day two?” the paranoid host added.

    “For that matter, what convinces you that these massive camps he’s planning are only for migrants? So, yes, I’m worried about me — but only as much as I’m worried about all of us,” Maddow concluded.

    This is the person who for four years got on TV every day and claimed Trump is secretly a Russian agent.

    She has previously stated that if Trump wins he will try to remain president for life and cancel all future elections:

    These people are completely ideologically captured and sound totally unhinged.

    They’re also psychologically projecting exactly what Democrats are trying to do to Trump on to him.

    *  *  *

    Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

    Tyler Durden
    Wed, 06/12/2024 – 13:20

  • Finland In First NATO Deployment Parks Jets On Russia's Doorstep
    Finland In First NATO Deployment Parks Jets On Russia’s Doorstep

    NATO’s two newest members – Finland and Sweden – have already seen their militaries quite busy as part of recent joint exercises with the alliance. For the first time this week, another milestone has been achieved as Finland has deployed fighter jets to another NATO country, in a further reversal of the Scandinavian country’s decades-long policy of neutrality.

    Seven F-18 fighter jets have been deployed by Helsinki to a base in southeastern Romania. Reuters said based on military statements that the aircraft will “conduct air shielding missions with Romanian and British jets.” Romania has long been dubbed in Western publications as “Russia’s doorstep”.

    Finnish Air Force, file image

    Finland is hailing this as part of efforts to speed up its military integration within NATO. “I’m sure that during this enhanced air policing air shielding mission our integration into NATO will take a big leap forward,” commander of Finland’s Karelia Air Wing Johan Anttila said this week.

    Finland’s entry into the Western military alliance has in effect doubled the border now directly shared by Russia and NATO countries.

    “This will certainly lead to tension. We can only regret this,” Kremlin spokesman Dmitry Peskov had earlier commented. “We had excellent relations with Finland. No one threatened anyone, there were no problems or complaints against each other. No one infringed on anyone’s interests, there was mutual respect.”

    And President Putin has previously derided Finland’s entry into NATO as all about joining “the Western club.”

    “Frankly speaking, I don’t understand why they need this. This is an absolutely meaningless step from the point of view of ensuring their own national interests,” Putin said back in March.

    “We didn’t even have troops; we removed all the troops from there, from the Russian-Finnish border,” he said. “However, it is up to them to decide. That’s what they decided. But we didn’t have troops there, now we will.”

    Meanwhile Denmark too is among those Nordic countries calling for increased defense spending and greater coordination on European defense. This has been a persistent talking point over the last months as Ukraine forces are not fairing well on the battlefield, and as Washington funds have dried up.

    Tyler Durden
    Wed, 06/12/2024 – 13:00

  • World Economic Forum Says, 'Let Them Eat Fake Meat!'
    World Economic Forum Says, ‘Let Them Eat Fake Meat!’

    Authored by Eric Utter via AmericanThinker.com,

    The globalist elites at the World Economic Forum (WEF) are calling on governments to promote fake meat and other alternative proteins in a coordinated effort to change consumers’ behavior.

    Shocking, I know.

    The authors of a white paper entitled “Creating a Vibrant Food Innovation Ecosystem: How Israel Is Advancing Alternative Proteins Across Sectors,” claim that changing humans’ eating habits will require a global effort with governments and corporations working together.

    Yes, bloated governments and big corporations working together to manipulate and coerce the little people’s behavior is a great idea!

    And perfectly befitting of fascism, or at least a robust oligarchy!

    Fake meat.

    Fake genders.

    Fake news.

    Artificial intelligence.

    I am sick of it all.

    Is anything real anymore?

    Yes, the existential danger this represents to us as humans — and formerly free and sentient beings — is all too real, indeed.

    Tyler Durden
    Wed, 06/12/2024 – 12:40

  • "Pelosi SHOULD Take Responsibility!" J6 Capitol Police Chief Says Speaker's Staff Blocked Additional Security
    “Pelosi SHOULD Take Responsibility!” J6 Capitol Police Chief Says Speaker’s Staff Blocked Additional Security

    Former Capitol Police Chief Steven Sund responded to a viral video of former Speaker Nancy Pelosi (D-CA) admitting that she was responsible for the lack of preparedness on Jan. 6, 2021.

    “Pelosi should take responsibility!” Sund posted on X, adding “She put herself in the security decision process and her Sergeant at Arms denied my requests for support before and during the Jan. 6 chaos. She undermined my law enforcement capabilities.”

    Sund, who was in charge of the Capitol Police during Jan. 6, then asked “Why did they change the law (2US1970) that tied my hands?”

    On Monday, the House Oversight Committee posted footage of Pelosi admitting “I take responsibility” for the lack of security on Jan. 6.

    The video shows Pelosi in an exchange with Chief of Staff Terri McCullough on the evacuation. Pelosi states:

    “We have responsibility, Terri. We did not have any accountability for what was going on there. And we should have. This is ridiculous.

    You’re going to ask me in the middle of the thing when they’ve already breached…that, should we call the Capitol Police? I mean the National Guard?

    Why weren’t the National Guard there to begin with?

    …

    They clearly didn’t know, and I take responsibility for not having them just prepared for more.”

    In February of last year, Sund told journalist Tucker Carlson that Jan. 6 was a “setup” – noting that Pelosi’s staff refused to authorize the deployment of the National Guard at the Capitol despite his pleas, and that federal agencies withheld information and warning signs of potential dangers prior to the riot.

    “It doesn’t seem like people really want to get to the bottom of it,” said Sund, adding “It really doesn’t. And it just gets worse. It gets worse from there.”

    Sund got approval to bring in the National Guard at 2:09 p.m. Before his approval, he alleged that he begged several generals, including General Michael Flynn, to bring the National Guard. The officials told Sund they did “not like the optics of the National Guard” as he allegedly begged for their assistance to intervene in the violence. –Daily Caller

    “This sounds like a set up to me,” Carlson said, adding “I’m sorry, it does.”

    To which Sund replied:

    “It gets better. So I beg and beg and he goes ‘well, I’m gonna walk down the hall and we’ll talk to the Secretary of Defense or whoever he’s gonna talk to. Right then I get a notification, oh, I’m still on the call, we have the shooting of Ashli Babbitt. And I said we have shots firing, I still remember yelling over the phone. We have shots firing on the U.S. Capitol, is that urgent enough for you now?“

    According to Sund, the National Guard didn’t show up until 6 p.m., hours after the fatal shooting of Babbitt. He also claimed that the Pentagon deployed resources to the homes of generals, but not the Capitol.

    Watch:

    https://platform.twitter.com/widgets.js

    Tyler Durden
    Wed, 06/12/2024 – 12:20

  • Golf And Investing: Mastering Long And Short Games For Success
    Golf And Investing: Mastering Long And Short Games For Success

    Authored by Michael Lebowitz via RealInvestmentAdvice.com,

    Let’s play a hole of golf to appreciate how two distinct aspects of golf provide valuable lessons for investors.

    You tee off with a driver on a 450-yard par four hole. Your drive is perfect. Not only does the ball land in the middle of the fairway, but you only have 200 yards remaining to the pin. Next, you pull out an iron, hit a beautiful shot, and the ball bounces onto the putting green. With only 40 feet between the ball and the pin and over 95% of the hole behind you, you think a birdie is possible, and in the worst case, you can get a par.

    Your birdie putt misses by 10 feet. You come up just short on the next putt, and your confidence turns to angst. Finally, the third putt rattles into the cup, scoring a disappointing bogey.

    Your long and straight 200-yard drive counts precisely as the 3-foot short putt you missed for par. Similarly, an investment idea backed by a well-thought-out macro thesis is only as good as adequately navigating the many short-term factors that can threaten investment performance.  

    Investing’s Long Game

    The long game involves forming expectations of economic growth and how revenues and earnings for sectors and industries may change with the economy as it cycles through your big-picture thesis. More simply, the long game is investing based on a macroeconomic outlook.

    Macroeconomic Analysis

    Macroeconomic analysis studies the behavior and performance of a country’s economy and its interaction with the global economy. It focuses on broad aggregate variables, including existing economic trends, business cycles, productivity, demographics, geopolitics, governments/central banks, credit, and technological change. 

    An increasingly important part of macroeconomic analysis is assessing how fiscal and monetary policies might affect economic growth and price trends.

    As we have recently witnessed, fiscal spending can have a massive impact on economic activity and inflation. However, as we may find out, it can also be a drag on economic activity in future years. Similarly, a central bank’s monetary policy, including how it manages interest rates and asset holdings, often dictates liquidity and financial conditions, significantly influencing asset markets and the economy.

    International trade and finance, including geopolitics, can play noteworthy roles in macroeconomic analysis. This incorporates trade balances and exchange rates, which are predicated on interest rates and inflation. Other factors include competitiveness, foreign relationships, and foreign investor cash flows.

    While longer-term views on the factors we note are critically important, we must also appreciate shorter periods in which our long-term thesis may seem out of favor. Importantly, we must assess whether aberrations to longer trends are short-term or new trends being established.

    Similar to golf, an excellent long investing game is crucial to understanding the economic path that directly feeds corporate earnings and consumer and government spending behaviors. Think of the long game as a road map, and your goal is to get from point A to point B. Therefore, assessing the most efficient route is your paramount task.

    Investing’s Short Game

    As we now discuss, an investor’s short game is equally important. These are the inevitable traffic jams, accidents, and weather conditions that will force you to stray from the long game.

    Investing’s short game includes market conditions, narratives, personal biases, behavioral traits, liquidity, and other factors that briefly influence asset prices away from longer-term trends.

    Even if you have an outstanding macroeconomic outlook, ignoring the short game, like being a lousy putter in golf, virtually ensures a bogey or worse on your investment performance.  

    Biases and Behaviors

    We have written numerous articles on our inherent biases and behavioral traits. For example, our latest on the topic, Behavioral Traits That Are Killing Your Portfolio Returns, reviews five traits that often hurt investors’ performance. We share a summary below, along with a bit of advice.

    Confirmation Bias: favoring information that affirms your beliefs. Therefore, read investment advice that goes against your views and may be uncomfortable. It will strengthen your convictions or help you appreciate where your thesis may prove wrong.

    Gamblers Fallacy: believing that future outcomes will follow prior outcomes. Today’s hot assets are often laggards tomorrow. While tracking and investing in today’s popular stocks is worthy, keep an open mind that some other stock or asset will likely be tomorrow’s winner.

    Herd Bias: doing what everyone else is doing. The thought process is rooted in the belief that if “everyone else” is doing something, I must do it to be accepted. As we wrote in Behavioral Traits:

    Investors generate the most profits in the long term by moving against the “herd.” Unfortunately, most individuals have difficulty knowing when to “bet” against the stampede.

    Trading with the “herd” can be profitable at times. However, we must understand the inherent flaws in group logic and always appreciate the contrarian opinion.

    The table below provides a few more examples.

    Technical Analysis

    Technical analysis is one of the best clubs in our short-game bag. While it can be inconsistent, as with every other forecasting model, it is the best tool for quantifying investors’ collective behaviors. Historical price and volume data provide a critical context for various price levels likely to motivate buyers and sellers.

    Technical analysis helps detect trend changes. Like reading a putt, technical analysis can help us grasp the risks and rewards a market offers. Furthermore, it can provide price levels with which to buy or sell. In turn, limits allow us to separate our trading actions from our behavioral traits.

    Liquidity Drivers/Fed

    Financial market liquidity is impossible to quantify, even though investors throw the word around like it’s a known commodity. Liquidity refers to the funds available for investors to invest. When liquidity is plentiful, investors tend to take more risk. Conversely, when liquidity is lacking, investors are often risk-averse.

    While liquidity is often considered part and parcel with actual investible dollars available, it’s more a function of investors’ cumulative actions. For instance, the Fed supplied the market with ample liquidity in late 2008, but a meaningful fear of significant bank failures crippled many investors. Sellers were plentiful, and buyers were hard to find. Liquidity was poor. The result was a sharp drawdown in equity prices with high volatility.

    The Fed supplies monetary liquidity to the banking system through interest rate policy and its balance sheet. Furthermore, as their role seemingly becomes more dominant with time, their actions become more impactful to markets. Consequently, as we see today, the stock market rallies as prospects of the Fed providing more liquidity via lower interest rates.

    Domestic and Global Events

    War, weather events, terrorism, political instability, and other local or global events can move markets. Quite often, event-driven trends are short-lived. During event-related volatile periods, investors should try to remain cool and calm. It’s easy to sell into a fear-laced narrative. It’s much harder to buy in such an environment. To quote Warren Buffett:

    Be fearful when others are greedy and be greedy only when others are fearful.

     

    Summary

    A well-thought-out long-game thesis can stay intact for long periods with slight adjustments when needed. Like a long and straight drive in golf, when your macroeconomic thesis proves correct, a good portion of your investing job is done.

    But, like golf, letting your irrational behaviors control your investment acumen, not appreciating that markets are sometimes foolish, or misdiagnosing what the Fed is doing can devastate shorter- and longer-term results.

    Do not forget the two-foot putt counts the same as a daunting drive off the tee box.

    Tyler Durden
    Wed, 06/12/2024 – 12:00

  • Did The Defense Make Jail More Likely For Hunter Under The Sentencing Guidelines?
    Did The Defense Make Jail More Likely For Hunter Under The Sentencing Guidelines?

    Authored by Jonathan Turley,

    For months, I have been expressing disbelief that Hunter Biden and his defense team were going to take the gun case to trial. Even on the eve of the trial, I thought that the defense might snap into sanity and plead out the case. The reason was simple. A guilty plea would have materially improved the chances that Hunter could get probation and avoid jail by accepting responsibility. Conversely, a trial in a case with overwhelming evidence of guilt would make it less likely that a judge would depart from the guidelines at sentencing. Nevertheless, Hunter went forward with a nullification strategy and, in so doing, it may have nullified his best chance to reduce the risk of jail time.

    After the verdict, I have been stating that jail time is a real possibility in this case despite the fact that this is a first offender. Frankly, I do not see any real need for incarceration in this type of case and many judges would be likely tempted to grant “downward departures” in sentencing or disregard any recommended prison sentence.

    It is also important to note that, after the Supreme Court’s ruling in United States v. Booker, sentencing guidelines are discretionary. Judge Maryellen Noreika could sentence him to probation in light of his struggle with his addiction and his status as a first offender (as well as the absence of other aggravating factors).

    Yet, while many view this as a relatively minor offense, the sentencing guidelines do not.

    Judges regularly sentence people to prison for these offenses. The sentencing guidelines put the recommendation at 15 to 21 months in prison. Moreover, over 90 percent of those convicted are sentenced to prison time.

    The chances of probation are increased with guilty pleas, which generally allow for a downward departure of two levels for taking responsibility. That may not seem like a lot but it could prove determinative for a judge on a marginal call over the need for incarceration. By pursuing the nullification strategy, Hunter lost that benefit and now would have to belated accept responsibility just before sentencing after putting the court and public through a trial.

    If the defense reviewed Judge Noreika’s past cases, they would have seen that she takes a tough approach on gun cases. In May, she sentenced defendant Zhi Dong to a year in jail for lying about his address on a gun form. Notably, that was twice the recommended sentence of the prosecutors.

    One point of distinction is that Dong purchased 19 pistols and 10 “lower receivers” rather than the single gun purchased by Biden. It is also notable that the prosecutors were only seeking six months of incarceration in that arguably more serious case.

    The defense strategy also makes it more difficult for Special Counsel David Weiss, who has shown remarkable lenience at critical stages of his investigation.  It was Weiss who allowed the most serious tax offenses to lapse under a statute of limitations (despite reportedly having an agreement to extend the period). It was Weiss who sought to give Hunter an obscene sweetheart deal that would have avoided any jail time and given him immunity for all crimes.

    Many remain skeptical of Weiss and his actions in this case. For that reason, the failure to plead guilty puts Weiss in a box. Given the sentencing guidelines of prison time, any recommendations for probation would be read as more favoritism for the president’s son. Weiss may feel compelled to follow the recommendations to show that Hunter is being treated the same as other defendants.

    Given the calculation for the three felonies, the defense had to know that they were increasing the chances of prison time by pursuing a nullification defense. The hope was that Wilmington is Bidentown and no local jury would convict the son of the favorite son of Delaware.

    It didn’t work out that way. The team seemed to overplay its hand with defenses that were so implausible as to be insulting for the jury. They suggested that Hunter might not have checked the box or signed the form during in a brief window where he was not using drugs. The prosecutors demolished those defenses within two days of the trial.

    Accepting responsibility after. a trial does not guarantee a downward departure. For example, in U.S. v. Womack, a defendant sought a departure for accepting responsibility before trial as a drug dealer. However, he still went to trial on other issues and the trial judge refused any departure on the basis of his earlier admissions of guilt. It found that he was still minimizing his responsibility for the underlying crimes. That decision was upheld on appeal.

    Now, Hunter may have painted both the prosecutors and the court into a corner. In a play for a hung jury, Hunter may have hoisted himself on his own petard. Guilt was never in doubt, but his efforts also removed any question of accepting responsibility before he was facing actual sentencing for his offenses.

    Tyler Durden
    Wed, 06/12/2024 – 11:20

  • Wall Street Reacts To Today's Dovish CPI Shocker: "Down And Out"
    Wall Street Reacts To Today’s Dovish CPI Shocker: “Down And Out”

    As we expected in our preview calling for “optimism for a low print“, today’s CPI delivered the kind of downside surprise that bond bulls and the Fed have been waiting for, as both headline and core came in a tenth lower than expected, largely driven by a 3.6% drop in gasoline prices – the biggest reason why the headline CPI was flat on the month – and as Bloomberg adds, “the miss looks legit, given the shortfall in the actual indices relative to forecast.” Indeed, at 0.16% the rise in core nearly rose just 0.1% when rounded. Meanwhile, in what may have been the biggest surprise, supercore services ex housing fell by 0.04%, the first negative reading since September 2021!

    https://platform.twitter.com/widgets.js

    The soft CPI print obvious puts two rate cuts in 2024 as the obvious center of policy distribution – with an outside chance for the Fed to keep its 3 cut baseline in today’s dots – and opens the door for the market to price more in 2025.

    Meanwhile, the big delta remains housing: as the BLS noted, the shelter index increased 5.4% over the last year, accounting for over two thirds of the total 12-month increase in the all items less food and energy index. Yet with lagged OER/shelter/rent still hot relative to real-time prices, the core monthly CPI gain undershot the median forecast for the first time since October.

    And here is the punchline: with real-time rent flat to down for the past year, the BLS-tracked OER 5-months lagged, is up 5.6%, and will decline gradually for the next 18 months as it catches down to real-time rents, even as the latter are actively rising, something which Omair Sharif at Inflation Insights agrees with in his morning note titled “Down and Out” : “A 0.2% monthly core CPI reading should be the base case for the balance of the year, especially as it looks more and more like the long-awaited slowdown in shelter costs will hit as soon as the next report.”

    In any case, however one looks at today’s report, the bottom line is clear: the doves have it, and now the ball is in the Fed’s court to decide whether to keep the dots at 3 cuts for 2024 or move to 2, even as the hawkish “1 cut” case has been officially eliminated. Indeed, here is Bloomberg’s Fed Watcher Chris Antsey on this issue: “for any Fed governor or district bank president who had been on the fence about one rate cut or two for 2024, this might have tipped them over. All eyes at 2 p.m. in Washington will be on that median estimate for the year-end policy rate.”

    And to underscore that, here are some of the more notable Wall Street reactions.

    Gregory Faranello, head of rates strategy at AmeriVet Securities:

    “The CPI is a really nice inflation reading. The Fed meeting today should see officials move toward two rate cuts for 2024 and softer CPI readings from here will keep a September cut in play.”

    Omair Sharif at Inflation Insights:

    “A 0.2% monthly core CPI reading should be the base case for the balance of the year, especially as it looks more and more like the long-awaited slowdown in shelter costs will hit as soon as the next report.”

    Ira Jersey, Bloomberg Intel chief rates strategist:

    “The knee-jerk reaction in the Treasury market isn’t surprising given the Fed-friendly CPI print, particularly the “low” 0.2% on core CPI. Jay Powell can now say ‘we’re making slow but additional progress on inflation’ at this afternoon’s press conference. Investors have been asking if members of the FOMC might change their summary of economic projection forecasts after the CPI print, since they are submitted prior to the start of the meeting. Today’s report probably doesn’t really shift expectations much. We’ve been thinking November and December cuts as our base base, and this data solidifies that view.”

    Lindsay Rosner of Goldman Sachs Asset Management

    “This was good news but it is one piece of news. June is a no-go. We have felt July the same. Again today is a good print for restrictive rates working to quell inflation, so September is a possibility.”

    Bryce Doty, Sit Investment Associates senior PM:

    “A calm CPI report. This CPI report gives the Fed the flexibility to still cut rates. We still expect the Fed to hold off until after the election though.”

    Ashwin Alankar, head of asset allocation at Janus Henderson Investors:

    “Until greater dis-inflation evidence is seen both in breadth and depth, today’s softness is supportive of a preemptive cut rather than a pivot in Fed policy towards accommodation.”

    Ana Galvao, Bloomberg Economics:

    “The downside surprise in CPI could have an impact on asset prices over the medium term, not just today. Bloomberg Economics’ Macro-Finance model suggests forecasts for two-year Treasury yields will fall by 15 bps through 1Q25.”

    Olu Sonola, head of US econ at Fitch

    “This was unequivocally a good report, a delightful appetizer while we await the main course later on today. The core services print of 0.2% was the lowest since September 2021 and that will definitely boost confidence if that trend continues over the next couple of months. While the door to an interest rate cut in July is effectively shut, the window still looks open for later on this year.”

    Finally, here is a good wrapper from Bloomberg’s econ team:

    “May’s soft core CPI reading should reassure the Fed that inflation is slowing. Disinflation was broad across both goods and services categories.

    “We expect core CPI prints over the summer to proceed at a mostly similar pace. With three more moderate prints in hand by the time of the September FOMC meeting, we think Fed officials will be convinced to start cutting rates then.”

    Source: Bloomberg

    Tyler Durden
    Wed, 06/12/2024 – 11:03

  • Suicide Drone Boat Hits Bulk Carrier Near Yemen
    Suicide Drone Boat Hits Bulk Carrier Near Yemen

    Yemen’s Houthi movement might have expanded its weapon arsenal by attacking a bulk carrier in the Red Sea with a suicide drone boat (the first time in this conflict). This marks a shift from the terror group’s usual anti-ship ballistic missiles and or kamikaze aerial drones. 

    On X, the British military’s United Kingdom Maritime Trade Operations said, “The vessel was hit on the stern by a small craft” about 66 nautical miles southwest of Al Hudaydah, Yemen. 

    Bloomberg said the commodity-hauling bulk carrier is called “Tutor.” Ship tracking data shows the vessel switched off its Automatic Identification System late last week after entering the Suez Canal. 

    Maritime security company Diaplous said a suicide drone boat hit Tutor, adding the vessel’s engine compartment was taking on water. 

    There is no confirmation if Houthi rebels carried out the attack. However, the terror group has been on a half-year rampage across major shipping lanes in the Red Sea and Gulf of Aden, attacking Western-linked vessels with missiles and drones. 

    According to an International Maritime Organization document obtained by the Middle East Eye, Houthi rebels have attacked 28 bulk carriers, tankers, container ships, cargo ships, and crude oil tankers.

    Nine of the vessels were Marshall Island-flagged and three were US-flagged. Others were from Malta, Barbados, Panama, Belize, Greece, Palau, Liberia, Singapore, and Portugal.

    On Monday, new images published on social media showed missile attack damage to the previously owned US bulk carrier “True Confidence” from March 6.

    Source: The Sea In Arabic

    These attacks have snarled global supply chains and sent containerized shipping costs soaring in recent months. 

    Next up is US CENTCOM responding to the incident. They usually do not comment on the specific weapons used and often say “projectile.” This report of the attack should be out this evening or tomorrow morning. 

    Furthermore, this won’t be the last time Houthi rebels use suicide boats against commercial vessels linked to the West in the Red Sea and or the Gulf of Aden. The group has also warned about expanding its threat coverage into the Mediterranian Sea. 

    Tyler Durden
    Wed, 06/12/2024 – 11:00

  • Biden's Problems Are The Real Threats
    Biden’s Problems Are The Real Threats

    Authored by Newt Gingrich via RealClearPolicy,

    Democratic analysts don’t seem to understand why the all-out legal assault on President Donald Trump isn’t working. It’s because they keep talking among themselves and not with the American people.

    The American people don’t live and work in the New York-Washington political-media-government bubble. If reporters and analysts listened to Americans, as we do at America’s New Majority Project, they would learn how decisive the choice between President Joe Biden or President Trump is. They would also see how difficult, if not impossible, it will be for President Biden to get easily re-elected.

    The propaganda media is trying to focus the election on what it sees as President Trump’s flaws. The Democrats, including the Biden campaign, are trying to focus the election on what they see as the threat President Trump represents.

    But the 2024 election is ultimately going to come down to a simple question: Can the American people afford four more years of Biden’s policies and principles?

    President Trump’s problems all involve his own alleged behavior and activities. Even the totally phony legal attacks remain locked into a Trump-centered issue. No American is hurt by the things President Trump has supposedly done. Indeed, few Americans pay any attention to the outlandish, manipulated legal attacks on President Trump.

    Most Americans see the case against Trump as political lawfare. If anything, they are offended by the left’s assault on the rule of law and the Constitution. This is why the conviction in the so-called hush money trial led to an enormous surge of contributions to Trump’s campaign. Far from running away from President Trump, the American people found themselves running to defend him. They saw him as a champion being persecuted unfairly and took the conviction as a direct warning of what could happen to them.

    By contrast, President Biden’s problems all impact everyday Americans. Bidenflation continues to drive already high prices higher. Child care costs increased 4.1 percent in the last year. Young parents are having to take on third and fourth jobs just to break even on costs. Grocery prices are forcing Americans to make tough decisions about how to feed their families. Young people can’t afford to buy houses – which is more than offsetting any good will Biden might have generated by (illegally) waiving student loan repayments.

    President Biden’s policies are causing millions of Americans real pain.

    Biden’s open border policy allows Venezuelan criminals to go to New York City and murder policemen. Biden’s open border policy allows fentanyl and other drugs to flood our country and poison our communities. When more than 100,000 Americans a year are dying from drug overdoses, it is hard worry about how Trump valued his apartment or paid his attorney.

    The average American can’t afford groceries, gasoline, or the electricity bill thanks to Bidenflation. Democrats want Americans to focus on these legal attacks. But Americans are focused on their own survival in the terrible economy President Biden and Democrats created.

    For the elite establishment Democrats, this is all still about politics. For the American people, it’s about survival.

    Economically, Biden’s destructive policies make life more expensive. Culturally, people are sick of radical dictates which denigrate religious liberty and seek to indoctrinate children against the will of their parents. Finally, as a matter of safety, Americans realize that Biden does not have the knowledge, ability, or wits to defend our nation against our adversaries.

    The 2024 election isn’t about what the establishment media thinks. It’s about America’s survival.

    For more commentary from Newt Gingrich, visit Gingrich360.com. Also, subscribe to the Newt’s World podcast.

    Tyler Durden
    Wed, 06/12/2024 – 10:45

  • WTI Falls After Unexpected Crude & Gasoline Inventory Builds; Biggest Imports In 6 Years
    WTI Falls After Unexpected Crude & Gasoline Inventory Builds; Biggest Imports In 6 Years

    Oil prices extended gains this morning following the cooler than expected CPI (supporting rate cuts and potential demand) following API’s reported crude draw overnight.

    “This week’s big recovery has weakened the bears’ hold on the market, although more price action is needed to confirm a bottom,” said Fawad Razaqzada, a market analyst at City Index and Forex.com.

    “But it is possible we could see crude oil prices come under pressure again after the recent recovery. The lower highs suggest the short-term path of least resistance is still downward, until told otherwise by the charts.”

    Expectations were for a modest draw in crude from the official data.

    API

    • Crude -2.4mm

    • Cushing -1.94mm

    • Gasoline -2.55mm

    • Distillates +972k

    DOE

    • Crude +3.73mm

    • Cushing -1.59mm

    • Gasoline +2.57mm

    • Distillates +881k

    The official data flipped the API data and showed a sizable crude inventory build last week (and gasoline build)…

    Source: Bloomberg

    The Biden admin added 339k barrels to the SPR (the lowest addition since early Dec 2023)

    Source: Bloomberg

    US crude production rose by 100k b/d back near record highs, even as the rig count continues to slide…

    Source: Bloomberg

    It looks like they flooded the market with imports – the largest in six years…

    Source: Bloomberg

    WTI tumbled on the surprise builds…

    Along with OPEC+ plans to phase out voluntary output cuts after September, “we think this signals a cautious optimism from the organization when it comes to the trajectory of future supply/demand,” says Rohan Reddy, director of research at Global X in emailed comments.

    “The mid-$70s to low-$90s crude pricing we’ve seen in Brent over the past few quarters seems to be a range that OPEC is comfortable with, as the organization maintains its holding pattern,” he adds.

    Meanwhile, pump prices have fallen to three month lows as crude and gasoline prices have fallen…

    But it’s not helping Biden’s poll numbers…

    Tyler Durden
    Wed, 06/12/2024 – 10:39

  • 8 Suspected Illegal Alien Terrorists Arrested In New York, Philadelphia & LA 
    8 Suspected Illegal Alien Terrorists Arrested In New York, Philadelphia & LA 

    For nearly a quarter-century, Americans have been subjected to mass surveillance via the Patriot Act. Yet, while the government violates the privacy rights of Americans with warrantless surveillance, the safety of the country is being undermined by top left-wing officials flooding the open southern border with millions of illegal aliens, some of which are known terrorists and or terrorist-linked. 

    Fencing along the U.S. border with Mexico in San Ysidro, Calif.Credit…Mark Abramson for The New York Times

    Disastrous open southern border policies pushed by the Biden administration make absolutely no sense in a world that is dangerously fracturing into a multi-polar state of war and conflict. America’s enemies can walk right in, and that’s exactly what’s happening. 

    NBC News reported Tuesday that eight men from Tajikistan with potential ISIS connections out of central Asia were arrested in New York, Philadelphia, and Los Angeles. 

    The FBI’s Joint Terrorism Task Force and US Immigration and Customs Enforcement were tracking the suspects for months after they crossed Biden’s open southern border in the spring of 2023.

    While they have not been charged with a terrorist connection or plot yet, the FBI alerted ICE they should be arrested because of potential ties to ISIS, and they were arrested on immigration charges, two sources say. They are detained and face removal proceedings before an immigration judge, and they could later face terrorism-related charges, two sources say. -NBC 

    One X user made this point, “Why do Americans still have to abide by the patriot act while migrants are free to roam? This is a failed president Biden.” 

    https://platform.twitter.com/widgets.js

    When one tries to rationalize the White House’s decision to allow tens of millions (est.) of illegal aliens into the country, the outcome here is a manufactured crisis that has left the country vulnerable to attack.

    In April, FBI Director Christopher Wray warned lawmakers that there is fear of a “coordinated attack” in major US cities. This warning came weeks after ISIS attacked a concert hall in Moscow, killing 145 people. 

    “Our most immediate concern has been that individuals or small groups will draw twisted inspiration from the events in the Middle East to carry out attacks here at home.

    “But now, increasingly concerning is the potential for a coordinated attack here in the homeland, akin to the ISIS-K attack we saw at the Russia concert hall a couple weeks ago,” Wray told a House Appropriations subcommittee earlier this year.

    Meanwhile, an Iranian intelligence officer is still on the loose, planning to kill Trump-era officials. 

    And in February, we penned this note, “More Red Flags Than Before 9-11”: Ohio Sheriff Warns American People Of Worsening Border Invasion.

    So again, our rights were violated over these past two decades, all in the name of freedom, and now the government has flooded the nation with migrants, some of which are terrorist or terrorist-linked. And of course, if there is another attack, it will only be met with more mass surveillance by the intel community.

    It’s becoming much more apparent what the agenda is at play here. Expand the nanny state one manufactured crisis at a time.

    Tyler Durden
    Wed, 06/12/2024 – 10:25

  • Appeals Court Upholds Ban On Student Wearing 'Only Two Genders' Shirt
    Appeals Court Upholds Ban On Student Wearing ‘Only Two Genders’ Shirt

    Authored by Zachary Stieber via The Epoch Times (emphasis ours),

    A U.S. appeals court on June 9 upheld a ban preventing a Massachusetts middle school student from wearing a shirt reading “There are only two genders.”

    Another prohibition by school administrators, this time blocking the same student from wearing the shirt with “only two” covered by tape, on which was written “censored,” is also allowed under court precedent, according to the ruling by the U.S. Court of Appeals for the First Circuit.

    “The question here is not whether the t-shirts should have been barred. The question is who should decide whether to bar them—educators or federal judges. Based on Tinker, the cases applying it, and the specific record here, we cannot say that in this instance the Constitution assigns the sensitive (and potentially consequential) judgment about what would make ‘an environment conducive to learning’ at NMS to us rather than to the educators closest to the scene,” U.S. Circuit Judge David Barron wrote for a unanimous panel of the court.

    In Tinker v. Des Moines Independent Community School District, the U.S. Supreme Court in 1969 ruled that a ban on students wearing armbands in protest against the Vietnam War violated the students’ First Amendment rights.

    U.S. District Judge Indira Talwani cited the ruling when in 2023 she ruled in favor of the administrators at the John T. Nichols Middle School (NMS) and Middleborough School District in Massachusetts against Liam Morrison (L.M.), the boy who wore the “two genders” shirt to school.

    “[The school] permissibly concluded that the shirt invades the rights of others,” Judge Talwani said before quoting Tinker. “Schools can prohibit speech that is in ‘collision with the rights of others to be secure and be let alone.’”

    The NMS dress code states in part that students must not wear pieces of clothing that “state, imply, or depict hate speech or imagery that [targets] groups based on race, ethnicity, gender, sexual orientation, gender identity, religious affiliation, or any other classification.”

    Liam was removed from class after a teacher raised concerns about his shirt. He was ultimately sent home after he declined to remove the shirt, and his father said he would not force the removal.

    When Liam went to school on another day with the shirt partially covered in tape, administrators told him to take it off, and he did.

    Lawyers for Liam argued that the shirts did not impinge on the rights of other students. The shirts “like the Tinker children’s armbands, constitute ‘a silent, passive expression of opinion,’” they wrote in a brief to the appeals court.

    “The school banned L.M.’s t-shirts based on a few subjective complaints that students felt upset, unsafe, or targeted,” they said. “But Tinker bars schools from censuring expression based on the ‘discomfort’ or ‘fear’ that results from exposure to ‘unpopular [viewpoints].’”

    In a related ruling from the U.S. Court of Appeals for the Third Circuit, the court ruled that a school district could not bar speech about “contentious issues” such as “racial customs,” “religious tradition,” or “sexual orientation” without a “particularized reason as to why it anticipates substantial disruption.”

    The First Circuit panel stated on June 10 that even if the shirts did not invade the rights of others, administrators reasonably forecast that they would disrupt learning.

    Administrators said the message on the shirt would “materially disrupt transgender and gender non-conforming students’ ability to focus on learning while in a classroom where the message is being displayed.” The court agreed, because of “the demeaning nature of the message” and how administrators attested to knowing of some students who identify as transgender struggling with suicidal thoughts.

    “In such circumstances, we think it was reasonable for Middleborough to forecast that a message displayed throughout the school day denying the existence of the gender identities of transgender and gender non-conforming students would have a serious negative impact on those students’ ability to concentrate on their classroom work,” wrote Judge Barron, who was joined by U.S. Circuit Judges O. Rogeriee Thompson and Lara Montecalvo.

    Judges Barron, Thompson, and Talwani were appointed by President Barack Obama. Judge Montecalvo was appointed by President Joe Biden.

    David Cortman, vice president of U.S. litigation for the Alliance Defending Freedom, which is representing Liam, told The Epoch Times in an email that “our legal system is built on the truth that the government cannot silence any speaker just because it disapproves of what they say.”

    He said the First Circuit erred in its decision and that the group was reviewing all legal options, including an appeal.

    A lawyer for the school and school district did not return an inquiry.

    Tyler Durden
    Wed, 06/12/2024 – 09:35

  • Consumer Prices Hold At Record Highs – Up 20% Since Biden Elected
    Consumer Prices Hold At Record Highs – Up 20% Since Biden Elected

    The headline consumer price index was unchanged MoM in May – the smallest change since July 2022 – just less than the +0.1% MoM expected. On a YoY basis, headline CPI rose 3.3% (less than the 3.4% exp) – but very much stuck in a range well above the 2% target for over year now…

    Source: Bloomberg

    Energy was the biggest drag on the headline CPI MoM…(Gasoline prices tumbled 3.6% in May from April, one key reason why the headline CPI was flat on the month. )

    Source: Bloomberg

    Core CPI rose 0.2% MoM (below the 0.3% exp) pulling the YoY change down to 3.4% (from 3.6% and below the 3.5% exp). That is the lowest Core CPI YoY since April 2021…

    Source: Bloomberg

    Core CPI has not had a down-month since President Biden was elected.

    Core Services inflation slowed notably MoM…

    Source: Bloomberg

    The shelter index increased 0.4 percent in May and was the largest factor in the monthly increase in the index for all items less food and energy.

    • May Shelter inflation 5.41% YoY, down from 5.55% in April and lowest since April 2022

    • May Rent inflation 5.30% YoY, down from 5.44% and lowest since May 2022

    For context on how important housing costs are to US inflation data, the shelter index rose 5.4% over the last year, making up over two thirds of the total 12-month increase in the all items less food and energy index.

    Source: Bloomberg

    It does make one wonder were exactly the BLS is getting their BS OER data from…

    https://platform.twitter.com/widgets.js

    The full breakdown…

    Services INflation remains awkwardly stuck above 5% while Goods DEflation is at its weakest since January 2004…

    Source: Bloomberg

    SuperCore CPI fell 0.05% MoM – its first drop since Sept 2021, but that left the YoY level still above 5.0%…

    Source: Bloomberg

    Transportation Services costs tumbled MoM to drag SuperCore lower MoM…

    Source: Bloomberg

    We note that consumer prices have not fallen in a single month since President Biden’s term began (July 2022 and May 2024 was the closest with ‘unchanged’), which leaves overall prices up over 19.5% since Bidenomics was unleashed (compares with +8% during Trump’s term).

    And prices have never been more expensive…

    That is an average of 5.4% per annum (almost triple the 1.9% average per annum rise in price during President Trump’s term).

    Source: Bloomberg

    Since President Biden was elected, food prices at home are up around 21% and food prices away from home are up almost 23%…

    And while the Biden administration will continue to gaslight voters with comments like “inflation is tumbling”… every man, woman, and child who actually buys food knows prices have NEVER been higher…

    Finally, while the ‘flations’ have broadly tracked M2 lower, we note that M2 YoY is now starting to turn back higher once again…

    Source: Bloomberg

    Will the next President and Fed head face a 70s redux?

    Source: Bloomberg

    And is this guaranteed if Powell decides “insurance” cuts are required (for Biden?)

    Tyler Durden
    Wed, 06/12/2024 – 09:28

  • Biden Approves Sending 2nd Patriot System To Ukraine Ahead Of G7
    Biden Approves Sending 2nd Patriot System To Ukraine Ahead Of G7

    “We’re going to continue to drive up costs for the Russian war machine,” White House spokesman John Kirby has said as President Biden departs for meetings with Group of Seven leaders in Italy.

    The Thursday through Saturday meeting will focus in large part on unveiling new sanctions and export controls against Moscow, particularly the expected widening of sanctions on the sale of semiconductor chips for Russia, but also targeting third parties in China that deal with Russia.

    Additionally the US will press allies on a plan to use frozen Russian assets to generate profits for Ukraine’s defense. “We will announce new steps to unlock the value of the immobilized Russian sovereign assets to benefit Ukraine and to help them recover from the destruction that Mr. Putin’s army has caused,” Kirby previewed additionally Tuesday.

    The proposal involves utilizing future interest on nearly $300 billion of frozen Russian central bank funds to back a $50 billion loan to Ukraine, which can be used for arms, defense, infrastructure, and rebuilding.

    During the summit of the world’s wealthiest democracies (Canada, France, Germany, Italy, Japan, UK, US, and with the EU a “non-enumerated member”), Biden will also meet with Ukraine’s Zelensky, where more US weapons for Kiev will be unveiled, especially the deployment of another Patriot missile system for Ukraine.

    The NY Times details that “The new Patriot system — the second that the United States has sent to Ukraine — will come from Poland, where it has been protecting a rotational force of American troops who will be returning to the United States, officials said.”

    “The system could be deployed to Ukraine’s front lines in the next several days, U.S. officials said, depending on any maintenance or modifications it needs,” the report adds.

    Biden is also expected to seek to assure Zelensky that Washington is staying firmly behind his government for the long haul. However, as the Times also points out, significant political change is looming over Europe amid a general war-weariness and perhaps greater willingness to pursue peaceful settlement with Russia: 

    Now, Europe is bracing for the possibility that former President Donald J. Trump, who has spoken openly of pulling out of NATO, could be back in power by the time the group next meets, in 2025. And several of the leaders present — including Prime Minister Rishi Sunak of Britain and President Emmanuel Macron of France — are facing elections that could redefine Europe.

    Interestingly, the Pentagon has remained reluctant to provide more Patriot batteries, especially ones that would have to be moved from defending US soil, or else batteries currently in vital hotspots.

    “With tensions rising on the Korean Peninsula, moving any Patriot batteries from defending against a possible North Korean attack was also deemed too risky, officials said,” NYT notes. The Israel-Gaza conflict is also a major concern.

    “Pentagon officials did not want to move any batteries from the United States,” the report emphasizes. “There is a Patriot battery at Fort Sill, Okla., for training American and Ukrainian troops, but moving it would take away training, officials said. Other batteries protecting bases and troops in the United States, including in Hawaii, were either deemed too far away or necessary for homeland defense.”

    This shows a greater pragmatism that is apparently on the rise among America’s generals and the defense establishment. Perhaps it’s also the result of the realization that Ukraine cannot ‘win’ under the current circumstances of the ongoing manpower and ammo crisis.

    Tyler Durden
    Wed, 06/12/2024 – 09:15

  • Our Apocalyptic 'New Normal': Most Global Conflict Since WWII, Most Billion-Dollar Disasters Ever, & Most Hungry People In History
    Our Apocalyptic ‘New Normal’: Most Global Conflict Since WWII, Most Billion-Dollar Disasters Ever, & Most Hungry People In History

    Authored by Michael Snyder via The End of The American Dream blog,

    Our world is witnessing apocalyptic events so frequently that many of us are starting to become numb to it all.  Major wars are raging all over the globe, children in Africa are literally dropping dead from starvation as hunger spreads like wildfire, and “billion dollar disasters” are hitting us more frequently than we have ever seen before.  But as long as these tragedies are not affecting us directly, most people don’t really care too much.  As the level of worldwide suffering rises, it seems as though hearts are getting colder at the same time. 

    The traumatic events of the past several years have left deep scars, and there are many that prefer to ignore the apocalyptic things that are happening in the world because it is just too much for them to handle emotionally.

    According to a brand new study, the number of armed conflicts in 2023 was the most that we have seen in a single year since the end of World War II…

    More armed conflicts took place worldwide in 2023 than any other year since the end of the Second World War, according to a Norwegian study published Monday.

    Last year saw 59 conflicts of which 28 were in Africa, the the Peace Research Institute of Oslo (PRIO) showed.

    We really are living in a time of “wars and rumors of wars”.

    But since it isn’t our sons and daughters that are being gunned down on the killing fields of eastern Ukraine, most of us in the western world aren’t really moved by all of the bloodshed.

    Every single day, more young lives are being wasted.

    But if you think that things are bad now, just wait until Israel and Hezbollah start lobbing thousands of missiles back and forth, China invades Taiwan, and the Russians and NATO begin directly pummeling one another.

    Meanwhile, global hunger just continues to grow.

    In fact, it is being reported that the number of people facing acute food insecurity last year was the highest ever recorded…

    The number of people threatened by hunger in the world has never been so high. In 2023, 281 million people in 59 countries were facing acute food insecurity, according to the 2024 Global Report on Food Crises, published on Wednesday, April 24, by several international organizations (including UN agencies, the European Union, the US Agency for International Development). This figure is up on 2022 (257 million) in its fifth year running.

    “This Global Report on Food Crises is a roll call of human failings,” warned UN Secretary-General Antonio Guterres, prefacing the analysis.

    A decade ago, world leaders dreamed of a day when hunger would be eradicated.

    Today, that dream is completely dead.

    Right now, hunger is exploding in areas all over the continent of Africa.

    In Sudan, people are literally eating dirt and leaves just so that they can fill their stomachs with something…

    Time is running out to prevent starvation in Sudan, warns the World Food Program.

    Twenty-five million people in Sudan need humanitarian assistance, 18 million are facing acute food insecurity and 5 million people are at emergency levels approaching famine as the country’s civil war passes the one-year mark.

    Amid so many other crises, the world’s largest hunger crisis is drawing little global attention. In the Al Lait refugee camp, for example, people are eating dirt and boiling leaves, just to have something in their bellies, reports Reuters. Others are eating grass and peanut shells, according to the World Food Program.

    Since it isn’t happening to us, most of us don’t really care.

    But hunger is growing here too.

    According to one recent survey, over one-fourth of the entire U.S. population is now skipping meals due to crazy high food prices…

    More than a quarter of Americans have resorted to skipping meals to avoid paying inflated grocery store prices, according to a new survey.

    According to a study by Qualtrics on behalf of Intuit Credit Karma, 80% of Americans say they have felt a “notable increase” in grocery costs in recent years. More than a quarter of respondents said the increased cost has led them to occasionally skip meals, while about one-third said they spend more than 60% of their monthly income on mandatory expenses such as food, utilities and rent.

    “Food insecurity is a major issue in this country as millions of Americans don’t have enough food to eat or don’t have access to healthy food,” Courtney Alev, a consumer financial advocate at Credit Karma, said in a statement.

    I keep warning my readers that this is just the beginning, and I hope that they are taking me seriously.

    We are also living at a time when major natural disasters are becoming more frequent.

    Last year, our world was hit by more “billion dollar disasters” than ever before…

    The planet was besieged by a record 63 billion-dollar weather disasters in 2023, surpassing the previous record of 57 set in 2020, said insurance broker Gallagher Re in its annual report issued January 17.

    Unfortunately, we may top that number this year.

    So far in 2024, there have already been 11 “billion dollar disasters” in the United States alone…

    A deadly outbreak of tornadoes last month caused $4.7 billion in damages across the Southern, Southeastern and Central U.S., making it one of the costliest weather events of the year so far, the National Oceanic and Atmospheric Administration said on Monday.

    The National Oceanic and Atmospheric Administration said there had been 11 confirmed weather and climate disaster events so far this year with losses exceeding $1 billion, with the total price tag topping $25 billion. There were more than 165 tornadoes during the May 6-9 outbreak, impacting Oklahoma, Kansas, Nebraska, Michigan, Indiana, Ohio, Kentucky, Tennessee, Alabama, North Carolina, South Carolina, Georgia and Florida, officials said.

    We have already experienced so many historic disasters, and hurricane season and the heart of wildfire season are still ahead of us.

    Almost every day, we are seeing things happen that we have never seen before.

    For example, storm chasers in the middle of the country just recovered a piece of hail that was “about the size of a pineapple”…

    Val and Amy Castor, veteran storm chasers with Oklahoma City television station KWTV, discovered a piece of hail more than 7 inches (17.78 centimeters) long Sunday along the side of the road near Vigo Park while they were chasing a major thunderstorm system.

    Val Castor said the stone was about the size of a pineapple.

    “That’s the biggest hail I’ve ever seen, and I’ve been chasing storms for more than 30 years,” Castor said.

    We aren’t supposed to have hail of that size.

    But this is the “new normal” where the old rules simply don’t apply.

    In California, there has been an alarming series of earthquakes during the past couple of weeks…

    First, a magnitude 3.6 earthquake in the Ojai Valley sent weak shaking from Santa Barbara to Los Angeles on May 31. Then came two small quakes under the eastern L.A. neighborhood of El Sereno, the most powerful a 3.4. Finally, a trio of tremors hit the Costa Mesa-Newport Beach border, topping out at a magnitude 3.6 Thursday.

    Having half a dozen earthquakes with a magnitude over 2.5 in a week, hitting three distinct parts of Southern California, all in highly populated areas, is not a common occurrence.

    The “Big One” is coming eventually, but I don’t think it is coming quite yet.

    Hopefully I am not wrong about that.

    Other nations are getting pounded by natural disaster after natural disaster as well.

    Brazil has been getting hit particularly hard.  Nightmarish flooding was making headlines down there for a while, but now wildfires are taking center stage…

    After historic floods recently claimed 172 lives in coastal Brazil, the country now faces a new crisis as fires rage through the Pantanal wetlands. These fires have surged nearly tenfold compared to the same period last year, setting the stage for a potential catastrophe worse than the devastating fires of 2020. With severe to extreme drought conditions expected, the situation is becoming increasingly dire.

    Data from the Brazilian space research agency, National Institute for Space Research (INPE) reveals a staggering 980% jump in fires across the Pantanal wetlands this year through June 5, compared to the same timeframe in 2023.

    Speaking of Brazil, it is in the midst of the worst pandemic of dengue fever that has ever been recorded in that nation…

    Brazil recorded the highest number of dengue cases globally in 2024 according to new data from the World Health Organization (WHO). There are nearly 6.3 million probable, and 3 million confirmed cases in the country.

    The South American country counts 82% of the 7.6 million probable cases of dengue recorded in the entire world by the WHO this year. Sadly, it also accounts for 77% of the 3,680 deaths globally from the virus and 82% of the 16,242 cases of severe dengue reported.

    Thus far, 2024 has seen the most serious dengue outbreak ever recorded in Brazil. According to the Ministry of Health, by the end of May, the number of probable cases was 328% higher than that recorded in the same period last year, which had already seen a record number of dengue diagnoses.

    So many pestilences are causing major problems all over the globe right now.

    In the Democratic Republic of Congo, the number of Mpox cases has surged to an all-time record high, and it is the form of the disease that has a particularly high death rate…

    The ongoing outbreak of clade I mpox in the DRC has already claimed many victims: The DRC reports “multiple provincial outbreaks” occurring between the beginning of 2023 and April 14, 2024, with an estimated total of 19,919 cases and 975 deaths — meaning that about 1 in every 20 patients have died.

    This outbreak is also perhaps the most widespread: “During 2023 and 2024, clade I mpox cases were reported from 25 of 26 provinces and, for the first time, from the capital city of Kinshasa,” the CDC team noted.

    Children are especially vulnerable: According to the report, “two thirds (67%) of suspected cases and more than three quarters (78%) of suspected deaths have occurred in persons aged 15 years [or younger].”

    If you ever catch this form of Mpox, you will remember it for the rest of your life even if you survive, because it will be the worst pain that you have ever experienced.

    On top of everything else, it is being reported that scientists have discovered “giant viruses” in the enormous sheets of ice that cover Greenland…

    The idea of a giant virus lurking on a vast ice sheet might sound like the plot to the latest science fiction blockbuster.

    But it’s become a reality, after researchers discovered giant viruses while exploring the Greenland ice sheet.

    Hopefully none of those “giant viruses” poses a major threat to humanity.

    But without a doubt, there will be more global pandemics in our future.

    In fact, all of the trends that I have discussed in this article are going to continue to intensify.

    Our apocalyptic “new normal” is here.

    We live in a world that is going completely and utterly mad, and you can try to ignore that if you wish, but it is the truth.

    *  *  *

    Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.

    Tyler Durden
    Wed, 06/12/2024 – 08:55

  • Futures Set For New Record High Ahead Of CPI, Fed Double Header
    Futures Set For New Record High Ahead Of CPI, Fed Double Header

    Futures are up modestly after another record close on Wall Street heading into today’s double whammy of CPI, and FOMC Dot Plot update, with Nasdaq leading and small-caps lagging. As of 8:00am, S&P futures are up 0.1% to 5,390 and set to extend the stretch of record highs as traders position for the potential disruption from US inflation data landing just hours ahead of Federal Reserve’s interest rate decision on Wednesday; Nasdaq futures rose 0.2%. Bond yields are flat to down 1bp after a stellar 10Y auction yesterday; the Bloomberg Dollar index rose again after four days of gains. Commodities are higher, led by Energy, despite with metals lagging. Today’s focus will be on the doubleheader of CPI and the Fed (our previews can be found here and here).

    In premarket trading, Mag7 and semis names are mostly positive thanks to Oracle shares surging 8.7% to a new record high after the infrastructure software company announced a cloud infrastructure partnership with Google Cloud, as well as one with Microsoft and OpenAI. Oracle also reported fourth-quarter results that featured better-than-expected Cloud Infrastructure revenue, even as it missed on total revenue and earnings. PetMed shares drop 11% after the online pet pharmacy reported results.

    Investors are preparing for a rare double-whammy of US CPI data and Fed announcements that have the potential to upend markets.

    “Today is a big day in terms of economic data and Fed announcement,” said Ipek Ozkardeskaya, an analyst at Swissquote Bank. “It could determine the global market mood for the rest of the month, and a good part of summer.”

    While policymakers are widely expected to hold borrowing costs at a two-decade high, there’s less certainty on officials’ quarterly rate projections, also known as the dot plot, where most expect the Fed to revise its dot plot from three rate cuts for the balance of 2024 to two, but a hawkish surprise of just one rate cut can not be excluded (see preview here). In any case, Fed voters already have the CPI print for May and it will feature prominently in their deliberations.

    “If it’s two, I think the market reaction can be quite positive and would support new highs in the S&P 500,” Grace Peters, head of investment strategy for Europe, Middle East and Africa at JPMorgan Private Bank, said on Bloomberg TV.

    Ahead of the Fed, the May consumer price index reading is due at 8:30 a.m. and is supposed to show another modest slowdown in inflation, with Goldman’s trading desk saying that it is optimistic for a low print.  Here is JPM’s core CPI MoM market reaction matrix (more details here).

    • Above 0.4%. The first tail-risk scenario, this outcome is likely achieved by an increase in both Core Goods and Core Services, with Core Goods flipping from deflationary to inflationary MoM. Within Core Services, we would likely see shelter inflation increase. The bond market reaction would likely be a 12-15bps increase as part of a bear flattening. Equities would react negatively to this repricing. Given the acceleration higher in inflation, rate cut bets for 2024 would evaporate and we will see the return of views of a rate hike. This would be exacerbated by any comments from Powell suggesting rates are not restrictive enough.  Probability 5%, SPX falls 1.5% to 2.5%.
    • Between 0.35% – 0.40%. This outcome is likely achieved by a smaller than expected disinflationary impulse from Core Goods with Shelter remaining flat. Bonds react negatively as Sept/Nov rate cut views decrease. With market fixings pricing in ~0.26% for Core MoM, the bond market reaction could be larger than expected with many Equity investors focused on the surveyed number of 0.3%. Probability 15%, SPX falls 1% to 1.25%.
    • Between 0.30% – 0.35%. This scenario has the widest range of outcomes since the low end of the range supports the disinflationary trend and the higher end of the range the stickier inflation argument. Feroli’s forecast for 0.33% would keep the YoY number flat from last month’s print. The biggest drivers are weak disinflation in shelter, increases in vehicle, medical, and communication prices. Given the move in bond yields on Friday (+14.6bps to 4.43%), there is likely a more muted response to a hotter print. Also referencing Friday, it was surprising to see stocks slough off the bond market move with the SPX falling only 11bps instead of 1%+ as we have seen over the last couple years in response to significant and sudden moves in bond yields. Probability 40%, SPX loses 0.75% to  gains 0.75%.
    • Between 0.25% – 0.30%. As mentioned, the market fixing implies a 0.26% core reading and the move in yields may not be as strong as one would expect on a beat where one would expect ~15bps move in the 10Y yield but this is a positive outcome for risk assets as this print would likely restart the Goldilocks narrative with 24Q1 data being viewed as an anomaly. Probability 25%, SPX gains 0.75% to 1.25%.
    • Between 0.20% – 0.25%. The immediate reaction would be a surge in September rate cut expectations with some likely pointing to July for a surprise, insurance cut given the move by the ECB. While July sees highly unlikely, putting September back on the table would be view favorably by risk assets and we could see some yield curve steepening to aid the Cyclicals/Value trade. Probability 12.5%, SPX gains 1.25% to 1.75%.
    • Below 0.20%. Another tail-risk scenario, likely fueled by a material decline in shelter inflation with goods disinflation supporting the print. Look for a collapse in yields, a material increase in July cut expectations, and a rally across all risk assets ex-commodities. In Equities, this would look like an “everything rally” with both NDX and RTY outperforming the SPX. This outcome, if confirmed in the July print, would trigger a reset in thinking about which stage of the economic cycle we currently reside as well as talks of the Fed having achieved a No Landing/Soft Landing scenario. Probability 2.5%, SPX gains 1.75% to 2.50%.

    In Europe, the volatility of the past two days is subsiding investors were caught unprepared for French far-right gains in the weekend’s European Parliament elections; European stocks are on course to rise for the first time in four sessions, led by gains in banks, insurance and financial services. The CAC 40 is higher but underperforming its regional peers as political uncertainty continues to linger. Here are the biggest European movers:

    • UCB shares gain as much as 5.6%, the most since February and to a record high, after JPMorgan raised its recommendation for the Brussels-listed biotech to neutral from underweight.
    • Credit Agricole shares rise as much as 3.2% after Jefferies upgrades to buy, saying that the pullback in French banks since President Emmanuel Macron called a snap election presents an opportunity.
    • Rentokil shares jump as much as 16% after US investor Nelson Peltz’s Trian Fund Management amassed a stake that made it one of the ten biggest shareholders in the pest controller.
    • Richter shares gain as much as 1.5% after Hungarian pharmaceutical company agreed to buy some assets from Mithra Pharmaceuticals and its subsidiary late Tuesday.
    • RWS Holdings shares rise as much as 6% after the translation services company’s interim results, with Berenberg saying growth returned in the second quarter and should now continue into 2H.
    • Lonza shares dip as much as 3.2%, weighed down by speculation that a potentially beneficial US bill may be excluded from the National Defense Authorization Act due to a tight pre-election schedule.
    • Legal & General shares fall as much as 4.7%, most since April 25, after the UK financial services firm forecast a slowdown in dividend-per-share growth.
    • Colruyt shares plunge as much as 14% after the retailer issued cautious guidance because of increased competition and promo pressure.
    • Umicore shares drop as much as 9.1%, to their lowest intraday since 2011, as the Belgian materials technology firm downgraded its guidance.
    • Camurus shares fall as much as 6.1% after holder Sandberg Development offers 1.35m shares at SEK550 apiece, representing approximately an 8.6% discount to the last close.
    • Stabilus shares fall as much as 17%, the steepest decline on record, after the German machinery maker sent out a profit warning last night, cutting its revenue and Ebit margin guidance.
    • Safestore shares drop as much as 3.1% after the self-storage company’s interim results showed a drop in adjusted earnings, while warning full-year EPS will be at the lower-end of consensus.

    Earlier, stocks in Asia fell for a second day, led by weakness in Japanese and offshore Chinese shares. The MSCI Asia Pacific Index declined as much as 0.4%, with Alibaba and Toyota among biggest drags. Benchmark in China was flat while that in Hong Kong closed at the lowest level since late April. Shares in Japan fell, while those in Korea were among the top gainers. In China, consumer prices rose less than expected in May and factory prices dropped for the 20th month in a row, fueling concerns over persistently weak demand. “Asian markets waded through murky waters today, with investors on edge ahead of a double-dose eventful day,” said Hebe Chen, an analyst at IG Markets. Also, specific headwinds are raising alarms for traders in China, Hong Kong, and Japan, she said.

    In Hong Kong, the Hang Seng index slipped below the “crucial 18,000 level” due to the lackluster China’s CPI data and fresh speculation about looming US chip restrictions, Chen said, adding that Japanese stocks tumbled as hot PPI muddles the outlook for the Bank of Japan’s monetary policy decision due this Friday.

    In FX, the Bloomberg Dollar Spot Index gained 0.1%, edging up for a fifth straight day as Treasury futures positioning data suggested the Fed will likely keep borrowing costs elevated. “A higher-than-expected US CPI will make the tone of the FOMC meeting more hawkish and result in USD strength,” said Richard Grace, a senior currency analyst at InTouch Capital Markets in Sydney. “Conversely, a lower-than-expected CPI will see the USD depreciate as Fed Chair Powell maintains the optimism for eventual rate cuts”

    In rates, treasuries are also slightly higher ahead of US consumer prices and the Federal Reserve decision, with US 10-year yields falling 1bps to 4.40%. Traders are pricing an 80% possibility that the Fed may cut rates in November, while they price a total of 39 basis points of easing by the end of the year. French 10-year yields are flat at 3.22%. Gilts rise, with little reaction shown to a slight beat for UK GDP in April.

    In commodities, oil prices are higher, with WTI rising 1.3% to trade near $78.90 a barrel. Spot gold falls ~$3 to around $2,314/oz.

    Bitcoin in consolidation mode in-fitting with broader markets; currently sitting just above USD 67k.

    Today’s economic calendar includes includes May CPI (8:30am), monthly budget statement and FOMC rate decision (2pm). Fed officials scheduled to speak after the FOMC meeting include Powell (2:30pm news conference), Williams (Thursday), Goolsbee and Cook (Friday)

    Market Snapshot

    • S&P 500 futures little changed at 5,387.00
    • STOXX Europe 600 up 0.5% to 519.79
    • MXAP little changed at 178.98
    • MXAPJ up 0.3% to 559.05
    • Nikkei down 0.7% to 38,876.71
    • Topix down 0.7% to 2,756.44
    • Hang Seng Index down 1.3% to 17,937.84
    • Shanghai Composite up 0.3% to 3,037.47
    • Sensex up 0.4% to 76,762.03
    • Australia S&P/ASX 200 down 0.5% to 7,715.51
    • Kospi up 0.8% to 2,728.17
    • German 10Y yield little changed at 2.61%
    • Euro up 0.1% to $1.0752
    • Brent Futures up 0.8% to $82.61/bbl
    • Gold spot down 0.2% to $2,312.95
    • US Dollar Index little changed at 105.19

    Top Overnight News

    • China’s May inflation is essentially inline (but still soft), with the CPI +0.3% (vs. +0.3% in Apr and vs. the Street +0.4%) and the PPI -1.4% (vs. -2.5% in Apr and vs. the Street -1.5%). RTRS  
    • Brussels will impose tariffs of up to almost 50 per cent on Chinese electric vehicles, brushing aside German government warnings that the move risks starting a costly trade war with Beijing. The European Commission notified carmakers on Wednesday that it will provisionally apply additional duties of between 17 and 38 per cent on imported Chinese EVs from next month. FT
    • The US Treasury is expected to roll out a big expansion of its secondary sanctions program on Russia this week, treating any foreign financial institution transacting with a sanctioned Russian entity as though it is working directly with the Kremlin’s military-industrial base. FT
    • The world faces a “staggering” surplus of oil equating to millions of barrels a day by the end of the decade, as oil companies increase production, undermining the ability of Opec+ to manage crude prices, the International Energy Agency has warned. FT
    • Israel/Hezbollah tensions spike after an Israeli strike killed the most senior Hezbollah commander since the start of the war in Gaza (Hezbollah fired a barrage of rockets toward Israel in response). Jerusalem Post
    • Emmanuel Macron said he won’t resign if his party suffers a poor result in snap French parliamentary elections, saying that’s absurd. “I will kill this idea, which never actually existed.” The French president said he’ll appoint a PM as the constitution demands but that doesn’t mean handing control to the far right. BBG
    • Today’s Fed meeting looks set to be one of the year’s most pivotal with Jerome Powell potentially offering his clearest hints yet to the rate path. Bloomberg Economics expects the new dot plot will probably indicate two 25-bp cuts this year, compared with three previously. BBG
    • US crude inventories resumed their downward trajectory, led by a 1.9 million barrel decline at Cushing, API data is said to show. That would be the biggest drop in more than four months if confirmed by the EIA today. BBG

    A more detailed look at global markets courtesy of Newsquawk

    APAC stocks were mostly subdued after the mixed handover from US peers as markets braced for the incoming US CPI data and the FOMC announcement. ASX 200 was pressured amid weakness in mining, tech, and the defensive sectors. Nikkei 225 retreated beneath the 39,000 level as participants digested firmer-than-expected PPI data which rose at the fastest annual pace in 9 months. Hang Seng and Shanghai Comp. were somewhat varied with underperformance in Hong Kong as China Evergrande New Energy Vehicle shares dropped around 20% amid the threat of losing key assets after local administrative bodies demanded repayment of CNY 1.9bln in subsidies by its units. Meanwhile, the mainland was cautious amid frictions with the US and after mixed Chinese inflation data including softer-than-expected CPI and a narrower deflation in factory gate prices.

    Top Asian news

    • US President Biden’s administration is to widen sanctions on Wednesday on the sale of semiconductor chips and other goods to Russia, according to Reuters sources. US will change export controls to include US-branded goods and not just those made in the US, while the measures are aimed at targeting third-party sellers in China and Hong Kong that are supplying Russia.
    • China reportedly weighs a ban on bank distribution of hedge fund products, according to Bloomberg.
    • Chinese Foreign Ministry says EU tariffs on Chinese EVs violate market economy principles and international trade rules; China will take all measures to firmly defend interests.
    • EU intends to impose provisional tariffs on Chinese EV’s of 21% for cooperating companies, 38.1% for those which have not

    European bourses, Stoxx 600 (+0.4%) are entirely in the green, attempting to trim some of this week’s significant losses, sparked by political uncertainty in Europe. European sectors hold a strong positive bias, with Banks taking the top spot as the sector finds its footing after this week’s weakness. Autos is the clear laggard, after news that the European Commission will notify carmakers that it will provisionally impose additional duties of up to 25% on imported Chinese EVs from next month. US Equity Futures (ES +0.1%, NQ +0.1%, RTY -0.1%) are trading on either side of the unchanged mark with price action tentative ahead of today’s key risk events, which includes US CPI and the FOMC Policy announcement.

    Top European News

    • ECB’s Kazaks sees hopes of further rate cuts this year. Need to be convinced that inflation will not return.
    • ECB’s Villeroy says inflation will be below 2% in France starting next year, even at 1.7%.
    • ECB Schnabel says the economy is recovering gradually, last mile of disinflation is proving bumpy; first indications of easing wage growth.
    • UBS expects BoE to start cutting interest rates in August (prev. forecast June)
    • French President Macron says they have not been able to form lasting coalitions. EU vote clear, could not be ignored.

    FX

    • USD is flat and in a narrow range as participants await the double dose of US risk events in the form of CPI and the FOMC; DXY resides within 105.21-32 parameters, well within yesterday’s 105.09-46 range.
    • EUR price action has been uneventful thus far awaiting today’s key risk events; EUR/USD in a 1.0733-47 range thus far.
    • GBP has also been trading sideways finding intraday resistance at 1.2750 (vs low 1.2729) with little immediate move seen in the wake of in-line GDP which ultimately resulted in little change in BoE pricing.
    • JPY is very modestly softer irrespective of the overnight risk aversion and firmer-than-expected PPI data; USD/JPY currently trading within a 157.03-37 range.
    • Antipodeans are both modestly firmer facilitated by an attempted recovery in base metals, but with gains capped as the risk tone remains cautious ahead of the aforementioned risk events.
    • PBoC set USD/CNY mid-point at 7.1133 vs exp. 7.2558 (prev. 7.1135).

    Fixed Income

    • USTs are flat ahead of US CPI for one final read into the FOMC meeting where market pricing currently has a 99% chance of an unchanged rate. Currently holding near a fresh WTD high at 109-20, sparked by Tuesday’s strong US auction.
    • Bunds are firmer with initial impetus stemming from Tuesday’s strong US auction and perhaps some marginal follow through from UK GDP numbers. Bunds are within a 130.21-130.50 bound, and have edged down towards the mid-point of the range after a poorly received Bund auction.
    • Gilts are firmer, in tandem with broader strength in EGBs/USTs; amidst this, the morning’s UK GDP metrics were broadly in-line but the internals around Construction/Manufacturing were soft and sparked a very modest dovish move to BoE pricing.
    • Germany sells EUR 3.3bln vs exp. EUR 4bln 2.20% 2034 Bund: b/c 2.0x (prev. 2.8x), average yield 2.6% (prev. 2.53%) & retention 16.75% (prev. 17.9%).
    • UK sells GBP 900mln 0.625% I/L Gilt 2045: b/c 3.88x real yield 1.304%

    Commodities

    • Crude is firmer and at session highs, continuing to build on yesterday’s bullish private inventory data which saw a larger than expected draw in crude and gasoline. Additionally, geopolitical updates out of Israel/Hezbollah point towards recent escalations within the region. Brent Aug currently around USD 82.85/bbl.
    • Precious metals are flat/mixed as traders look ahead to the US CPI and FOMC; XAU sits in a USD 2,310.60-2,317.70/oz range.
    • Base metals are attempting a recovery from the recent slide in prices induced by Fed expectations following Friday’s NFP data. Chinese inflation did little to sway prices as trades await upcoming US macro events.
    • IEA Oil Market Report: lowers 2024 demand growth forecast by 100k BPD to 960k BPD; 2025 oil demand growth seen at 1mln BPD amid a muted economy and clean energy tech deployment; major oil surplus seen this decade as demand peaks.
    • UBS says on Gold “we have raised our 2024 avg. forecast and year-end target by 8% to USD 2365 and USD 2600 respectively”
    • US Private Inventory Report (bbls): Crude -2.4mln (exp. -1.05mln), Cushing -1.9mln, Distillate +1mln (exp. +1.6mln), Gasoline -2.5mln (exp. +0.9mln).
    • Azerbaijan oil production was 62.1k/T day in May.

    Geopolitics: Middle East

    • Rocket sirens are reportedly sounding over several towns in Northern Israel, according to Horowitz on X; Israeli media says “Heavy bombardment from Lebanon towards northern Israel, and sirens activated in Tiberias, Safed, and Galilee” via Sky News Arabia.
    • IDF Radio reports “More than 100 rockets fired from the south Lebanon on Safed, Tiberias and their surroundings in a few minutes”.
    • Hamas official said their response to the Gaza ceasefire deal is responsible, serious, and positive, while the official added the response opens a wide way to reach an agreement.
    • Israeli official said Hamas has rejected the proposal for a hostage release presented by US President Biden, while the official added that Israel received the Hamas response via mediators and that Hamas changed the proposal’s main parameters.
    • Israeli airstrike on south Lebanon killed four people including a senior Hezbollah field commander, according to three security sources cited by Reuters. It was later noted that the Hezbollah commander killed in an Israeli airstrike on Tuesday was the most senior member killed in the last 8 months.
    • US Pentagon said Secretary of Defense Austin discussed with his Israeli counterpart by phone efforts to calm tensions along the Israeli-Lebanese border, according to Sky News Arabia.
    • Rocket sirens are reportedly sounding over several towns in Northern Israel, according to Horowitz on X; Israeli media says “Heavy bombardment from Lebanon towards northern Israel, and sirens activated in Tiberias, Safed, and Galilee” via Sky News Arabia; IDF Radio reports “More than 100 rockets fired from the south Lebanon on Safed, Tiberias and their surroundings in a few minutes”.

    Geopolitics: Other

    • EU is proposing to sanction Russian oil-shipping giant Sovcomflot, according to Bloomberg.
    • EU is pushing ahead with Chinese electric vehicle tariffs that are set to bring in more than EUR 2bln a year, despite opposition from Germany, according to FT. European Commission will notify carmakers that it will provisionally impose additional duties of up to 25% on imported Chinese EVs from next month. Note, it was reported that yesterday Chinese Auto Industry Association CPCA said the EU could impose a 20% tariff on Chinese EVs, which is an understandable trade practice.
    • Japan mulls sanctioning groups including Chinese firms for aiding Russia’s invasion of Ukraine, according to NHK.

    US Event Calendar

    • 07:00: June MBA Mortgage Applications +15.6%, prior -5.2%
    • 08:30: May CPI MoM, est. 0.1%, prior 0.3%
      • May CPI YoY, est. 3.4%, prior 3.4%
      • May CPI Ex Food and Energy MoM, est. 0.3%, prior 0.3%
      • May CPI Ex Food and Energy YoY, est. 3.5%, prior 3.6%
      • May Real Avg Hourly Earning YoY, prior 0.5%
      • May Real Avg Weekly Earnings YoY, prior 0.5%, revised 0.6%
    • 14:00: June FOMC Rate Decision
    • 14:00: May Monthly Budget Statement, est. -$276.5b, prior -$240.3b

    DB’s Jim Reid concludes the overnight wrap

    Forgive me for feeling a touch melancholy this morning as I type this at 5am as a 50 year old. I’ll be celebrating by giving the opening speech this morning at DB’s 28th annual European LevFin conference featuring over 1000 investors and issuers. See you there if you’re attending. The highlights from my 40s were 3 kids I didn’t know if I’d ever have, 4 costly renovation projects, 6 knee surgeries, several inner ear surgeries, one back surgery and several trapped nerves. On the plus side of my mid-life crisis, my golf handicap has gone from 6 to 1.9 in my 40s which partly explains some of the ailments above. Let’s hope by the time I’m 60 I’ll have a few AI generated artificial limbs to help me hit the golf ball further.

    It’s been another challenging 24 hours for European markets, with risk assets hacking out of the rough thanks to the ongoing political uncertainty in Europe. Meanwhile in a different universe, the S&P 500 (+0.27%) sailed down the middle of the fairway and hit a fresh all time with Apple (+7.26%) having its best day since November 2022 and returning above $3tn market cap and to an all time high itself after a difficult first 3-4 months of the year.

    In terms of the European market moves, it was another difficult day for French assets. For instance, the 10yr Franco-German spread widened by another +5.0bps to 60bps, and the CAC 40 (-1.33%) fell to its lowest level in almost four months. Banks were among the worst affected again, with fresh losses for Société Générale (-5.02%), Crédit Agricole (-3.90%) and BNP Paribas (-3.89%). The three banks are now down -12.11%, -7.34% and -8.47% respectively since Monday’s open. At the height of the selloff yesterday, there were even unconfirmed press reports (later denied) that President Macron could resign after the election, before yields came off from their highs later on in the session.

    President Macron is set to speak at a press conference today, but in the meantime, there have been growing questions about the political landscape his centrist alliance will be facing at the elections. On the left, an alliance was formed on Monday night between the Greens, Socialists, Communists and La France Insoumise. But on the right of the political spectrum there’s still uncertainty, as Éric Ciotti, who leads Les Républicains party, called for an alliance with Marine Le Pen’s Rassemblement National. Other figures in the party sternly rejected those suggestions, but the historic divisions between the traditional right-wing parties and the RN are becoming increasingly blurred as the latter has come to dominate the right-wing of the political spectrum in France . Later in the day, we heard that talks on forming an alliance between RN and the smaller far-right Reconquest party had broken down. In terms of the latest polls, an Ifop survey out yesterday had Marine Le Pen’s party on 35%, an alliance of four left-wing parties on 25%, and Macron’s alliance on 18%.

    This political uncertainty weighed on markets across the continent. That included a third day of losses for the STOXX 600 (-0.93%), with the Stoxx banks index (-2.66%) seeing its largest decline since August. Equities slumped in several countries, with particularly sharp declines in southern Europe, including Italy’s FTSE MIB (-1.93%) and Spain’s IBEX (-1.60%). Sovereign bonds mostly rallied given the risk-off tone, and yields on 10yr bunds came down -4.8bps. But there was still a clear widening in spreads, with 10yr French yields (+0.2bps) just closing at their highest level of 2024 so far. Italian yields (-0.1bps) were also broadly flat despite the core rates rally.

    This included 10yr US yields being down -6.3bps to 4.405%. US yields had been trading modestly lower on the day in the risk-off environment emanating from Europe but then saw a sizeable rally after a strong 10yr Treasury auction. This saw the highest bid-to-cover ratio in over two years and the lowest primary dealer take up since August, with $39bn of bonds issued 2bps below the pre-sale yield.

    The next test / opportunity for Treasuries will come with today’s epic double bill with the US CPI release for May, as well as the Fed’s latest decision. In terms of the Fed, they’re widely expected to leaves rates unchanged today, so the focus is likely to be on the latest dot plot, as well as the new economic projections. Last time, the dot plot still pencilled in three cuts this year, but only just, and it would have only taken one dot to shift for the median to be at two cuts. Since then, the inflation figures have remained higher than the Fed would ideally like, and our US economists expect the median dot to only show two cuts now, and they also see the core PCE forecast for this year being upgraded by two-tenths to +2.8%. Looking forward, they also see the 2025 dot being revised up by 25bps, so that would signal a shallower pace of cuts. See here for their full preview.

    Of course, the signals from the meeting could be influenced by the CPI release earlier in the day, as a surprise in either direction could lead to shifts in their inflation projections. In terms of what to expect, our US economists expect headline CPI to come in at +0.12%, and core CPI to come in at +0.27%. If those are realised, then that would mean the year-on-year headline CPI comes in at +3.4%, while core falls to +3.5%. Click here for their full CPI preview and how to sign up for the subsequent webinar.

    Ahead of this US markets were largely unphased by the developments in Europe, with the S&P 500 (+0.27%) posting another record high. One sector affected by contagion from Europe were banks as the S&P 500 banks index fell -2.15%. Tech stocks outperformed, with the NASDAQ up +0.88% and the Magnificent 7 up +1.00%. The latter came mostly as Apple (+7.26%) posted its best day since November 2022 to climb to a new all-time high. Less than two months ago Apple was down -16.7% from its last all time high back in December so a decent bounce back. Monday initially saw a dip after the OpenAI partnership was a “sell the fact” moment but the reaction turned much more positive yesterday.

    Asian equity markets are mostly declining this morning with China’s soft consumer prices data weighing on proceedings. As I check my screens, the Hang Seng (-1.43%) is the worst performer among Asian indices on news that the US is considering further trade sanctions on China’s access to AI chip technology. Meanwhile, the Nikkei (-0.63%), CSI (-0.18%) and Shanghai Composite (-0.04%) are also trading marginally lower. The KOSPI (+0.38%) is managing to buck the trend though. US equity futures are flat along with US treasuries.

    Coming back to China, CPI disappointed as it rose +0.3% y/y in May, weaker than market expectations for a rise of +0.4%. PPI contracted -1.4% y/y in May (v/s -1.5% expected), marking its smallest contraction since February 2023 and up from last month’s -2.5% decline. It has been negative for 20 months now though. Elsewhere, Japan’s PPI rose +2.4% y/y in May (v/s +2.0% expected) as against prior month’s upwardly revised increase of +1.1%.

    Looking at yesterday’s other data, the UK unemployment rate rose to 4.4% (vs. 4.3% expected) over the three months to April, which is its highest level in two-and-a-half years. Separately in the UK, there’s just over three weeks until the election on July 4, and a YouGov poll showed the right-wing Reform UK party on 17%, just one point behind the governing Conservatives on 18%. Labour are still clearly ahead on 38%, but that’s the closest gap between the Conservatives and Reform in a poll so far.

    To the day ahead now, and the main highlights will be the US CPI release, along with the Federal Reserve’s decision and Chair Powell’s press conference. Otherwise in Europe, we’ll get the UK GDP release for April, and central bank speakers will include ECB Vice President de Guindos, and the ECB’s Vujcic, Nagel and Villeroy.

    Tyler Durden
    Wed, 06/12/2024 – 08:13

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